Calculate the consumer surplus with the tariff before a custom union is formed.

Suppose that Egypt and Israel form a customs union. The common external tariff assessed on wheat fro Show more Suppose that Egypt and Israel form a customs union. The common external tariff assessed on wheat from outside the bloc is $0.25. The demand for wheat in Egypt is given by: Q=100-20P . The supply of wheat in Egypt is given by: Q=20+20P . The U.S. supplies Egypt wheat elastically at $1.00 while Israel supplies Egypt wheat elastically at $1.15. a. Plot the supply and demand curves for wheat in Egypt in the following diagram and correctly label the terminal equilibrium points values and vertical intercepts. b. On the diagram in the next page draw the SU.S. and SIsrael and SU.S.+tariff and SIsrael+tariff lines. c. Calculate the consumer surplus with the tariff before a custom union is formed. d. Calculate the producer surplus with tariff before accustom union is formed. e. Calculate the trade creation effect and the trade diversion effect after the custom union is formed between Egypt and Israel. SEE EGYPTIAN WHEAT MARKET GRAPH IMAGE ABOVE. f. If Egypt instead forms a custom union with the US instead what would be the trade creation and trade diversion effects? Show all your work. Show less

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